After weakening by 1.3 per cent against the US Dollar over the course of last week, the Rand was able to climb by 0.5 per cent against its American counterpart after a two-week strike involving the employees of South Africa’s second largest coal mine, Exxaro Resources Ltd, came to end.
The South African Rand exchange rate was trading in the region of 0.1081 against the US Dollar as of 10:06 am GMT
There were fears that if the strike continued for much longer it could put coal supplies to the state-owned electricity company Eskom Holdings SOC Ltd at risk, potentially halting production in factories and mines. A similar situation occurred just over five years ago.
Although the commodity-driven Rand’s recent gains are largely the result of Exxaro employees returning to work, the currency also benefited from the rising price of metals like platinum and copper and the news that Cyprus had secured a much needed bailout package.
Cyprus was given until today to acquire the almost six billion Euros demanded by the EU in order for a bailout to be triggered. After a weekend of uncertainty, and as zero-hour loomed, a deal was finally struck and a ten billion Euro bailout was approved.
As currency strategist John Cairns comments: ‘The Cyprus bailout and the reduced threat of electricity shortages should result in the Rand rallying today.’
Cairns, who works for Johannesburg-based Rand Merchant Bank, was then quoted as saying: We’re also seeing risk-on in global markets, with equities and other risk currencies rallying.’
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